Noteworthy...

Dear Readers: I will be on the road much of this week, so I'm afraid my blogging will be limited to... well, to be perfectly honest, I doubt I will be blogging at all! I'll be back next week with more news, analysis, and quips about this crazy field of international relations. Until then, today's Noteworthy reads:

Taking Africa beyond Aid. Yet another review of Moyo's book, Dead Aid, and a loud call for the development of African financial markets. As interesting as the piece itself are the comments, which inevitably turn to discussion of the Chinese presence on the continent

How can struggling countries break out of poverty if they're trapped in systems of bad rules? Paul Romer suggests "charter cities" as a possible solution

Something stinks. Must be Scotland's deal with Libya...

Osei Kofi on Africa's lagging contemporary art scene (and what to do about it)

Hugo Restall has an interesting piece in today's WSJ on the threesome that is Latin America (any country will do, really), the U.S. and China. While I tend to disagree with much of his analysis, it is an interesting argument nevertheless

For those among you who believed that China's alleged withdrawal from the deal with the Congo signaled China's retreat from the continent.... I hate to say 'I told you so,' but I told you so: China was never intending to withdraw, it was merely revising its strategy

Have a great week everyone!

Where 21st century Asian socialism meets 21st century Latin American socialism

Don't blink, otherwise you might miss the litany of deals China has been making across Latin America! China has recently signed oil deals with Argentina, Ecuador, and Venezuela; and has contracts and cooperation deals with governments in Brazil, Peru, Chile, Colombia, Uruguay - effectively the entire Latin American continent.

In the early stages of Sino-Latin American cooperation, China seemed to be treading rather carefully, hesitant of both its foreign policy and place on the international global stage. The recent increase in overseas activity - from Africa to Latin America, and beyond - however, suggests that Chinese confidence is rapidly growing. The global financial crisis in particular has raised skepticism over America's hitherto seemingly unwavering preeminence, and has at the same time proffered China as a viable alternative. Indeed, an increasing number of countries are now saying "thanks, but no thanks" to U.S. cooperation and assistance, choosing instead to place their faith in the Chinese. Latin America is case in point.

The strategy the Chinese are employing across the continent appears identical to that which is being pursued in Africa, with oil-for-infrastructure contracts as the primary modus operandi. Like in Africa, too, Chinese investment is manifest on many economic levels - from high level government contracts all the way down to small-scale private entrepreneurs who sell vegetables and various knick-knacks on the side of the road. What's more interesting in the case of Latin America, however, is that the partnerships appear to be much more ideologically laden than those in Africa. This is especially true in Venezuela.

In a a great video from Al Jazeera English (HT: Double Handshake), Venezuelan economics professor Jesus Farias briefly touches on the issue of the Venezuelan socialist model and its seemingly logical intersection with its Chinese counterpart (this, around 2:34). He seems to be suggesting that cooperation between China and Venezuela is predicated not only on economic exchange, but has as its broader objective the restructuring of the global political landscape. I'm not wholly certain that this is necessarily the case - or that such is the objective of other Latin American countries engaged in relations with China - but it certainly is an interesting point worthy of further consideration. Viva la revolution...?

Don't cry for me Latin America. Yet.

While this blog is mostly devoted to issues surrounding the Sino-African partnership, one must not forget that China is similarly active in other regions of the world, most recently Latin America. China's strategies in Latin America seem to differ little from those employed in Africa, with 'oil-for-infrastructure' deals, tech investments, extensive bilateral trade agreements, and the influx of cheap Chinese goods as the wooing tactics of choice. Trade between China and Latin America soared from $10 billion in 2000 to $140 billion in 2008.

As is true of Africa, Beijing's main interest in Latin America is the guaranteeing of access to the region's raw materials - oil, soybeans, copper, iron ore, etc. - to fuel its continued rapid growth. Yet as is also true in Africa, China's ambitions are also grandly geopolitical. According to Tyler Bridges:

China is beefing up its embassies throughout Latin America, opening Confucian centers to expand Chinese culture, sending high-level trade delegations throughout the region and opening the door for ordinary Chinese to visit Machu Picchu, Rio, and other tourism hot spots.

Aiping Yuan came to Rio de Janeiro from Beijing in 1997 on a lark, fell in love with the city, and decided to stay. She studied Portuguese, and when Brazilian President Luiz Inácio Lula da Silva made his first visit to China in 2004, she opened a small school in Rio to teach Mandarin.

She began with six students and today has 300, including senior executives at Petrobras, the country's biggest oil company, and Vale do Rio Doce, the biggest mineral producer. Both have growing business with China.

"Chinese is the language of the future for Brazil," Yuan said with a big smile.

Chinese will be the language of more than just Brazil if Beijing's leaders have anything to do with it. As Bridges aptly observes, China is buying zinc from Peru, copper from Chile, and iron ore from Brazil. It's shipping equipment to Brazil, buses to Cuba, clothes to Mexico and cars to Peru. Chinese tech giants Huawei and ZTE are likewise grabbing business from established telecom suppliers across the continent, most prominently in Argentina, Chile and Colombia. Yet while China seemingly has a Latin America strategy (or perhaps a 'developing world' strategy more generally; it's hard to tell), Latin America doesn't appear to have a China strategy.

Writing in his excellent blog, Tom Pellman cites David Shambaugh who notes:

Latin America is acting toward China's expansion in the world in a reactive, disorganized or ad hoc fashion. When I asked Itamaraty (Brazil's foreign ministry) about its strategy on China, I got blank stares. There is no strategy.

Such a lack of strategy indubitably works to the detriment of Latin American states - as it does African nations which similarly lack much in the way of a policy of engagement with the eager Chinese - who stand to gain from Chinese investment. In Latin America, as much as in Africa, there are many benefits to be accrued from recent Chinese interest. Yet without a plan of action, it seems that China will walk away as the sole beneficiary when all is said and done.

Lula in Beijing to "defend a new economic order"

Brazilian President Luiz Inacio Lula da Silva arrived in Beijing today where it is expected that he and President Hu will strengthen bilateral relations between their two countries, promote oil contracts, strike deals on the sale of Embraer aircraft, and negotiate meat exports and biofuel for cars, among other top agenda items.

Already in March, China surpassed the U.S. as Brazil's biggest trade partner, and the trip seems to signal even further shifts in the global economic arena: namely, the U.S. out, China in. Or, perhaps more realistically - the U.S. down, but not (yet?) out; China up, and rising: 

"I think the trip that I am about to embark on... is one of the most important I am going on to defend a new economic order and a new commercial policy in the world," Lula told reporters before leaving Brazil.

Roberto Jaguaribe, a Brazilian foreign ministry official, said last week the trip represented a "reorganisation of the international scene" in which the top emerging economies were playing a bigger role in world affairs.

Among the more curious agenda items to be discussed between Lula and Hu is Lula's proposal that the countries conduct bilateral trade through each nation's currency, removing the U.S. dollar as an intermediary. Silva has been urging the end of the use of the American dollar in South American trade for some time now, suggesting such a move would reduce transaction costs for both exporters and importers, especially those operating on a smaller scale. Brazil and Argentina have agreed to trade with each other using their own currencies, and China and Argentina have likewise agreed to establish a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in Chinese currency. Might we be witnessing the gradual usurping of the U.S. dollar as the world's currency reserve by the Chinese yuan?

Such a reality may still be some way off, but the Chinese are slowly laying the ground for the yuan's ascendance, one bilateral negotiation at a time.

Chinese shops in Argentina

Via Danwei:

Currently, there are 60,000 to 70,000 Chinese in Argentina. Only about 15,000 to 20,000 of those reportedly identify as Taiwanese. Though the Taiwanese were the first to arrive in Argentina in the 1980s, their population has dwindled in recent years as many left, with a steep drop in numbers occurring after Argentina’s economic crisis of 2001. Meanwhile, the number of mainland Chinese immigrants has proliferated, in step with China’s growing investment in the country and the rest of Latin America.

In Argentina, there are about 4,200 Chinese-run supermarkets and their numbers are growing. A 2008 statistic reported that approximately 14 new Chinese-run supermarkets open up each month.

Chinese shops and supermarkets are an equally prevalent phenomenon across Africa. Such small-scale ventures carry great developmental implications for the continent (both of them), arguably more so than do larger investment projects. While major projects generally bear most heavily on the formal sector, such supermarkets and shops span both the formal and informal sectors, with especially dire implications for informal sector workers who are unable to parry Chinese competition, and have few alternatives for employment and profit. It will certainly be fascinating to examine the varied (or parallel) ways in which similar Chinese strategies impact economic growth and development in Africa and Latin America, respectively.

China continues to extend its reach into Latin America, world, etc.

Before the much hyped up and protested G20 summit, occurred a more low-key gathering held among members of the Inter-American Development Bank, which ended this Tuesday. To the surprise of no one, the Chinese, and especially Zhou Xiaochuan, the head of China's central bank, seemingly ran the show. How is this possible, you may ask? China became an official member of the Inter-American Development Bank in January 2009, and has been making its presence known ever since.

At this most recent IDB meeting, China agreed to a $10.24 billion currency swap with Argentina, a country whose bonds could be worth next to nothing by 2010. While China has done similar swaps with other countries, this is its first such deal with a Latin American state. So why now? And why with Argentina? 

Writing in FP Passport, Andrew Polk posits two reasons - the first, straightforward, the second "disturbing":

First, as Xinhua reports, the Argentines can essentially use the RMB as extra cash to pay for imports. But one might note that, since the Yuan is not a convertible currency, the money can only be used to purchase goods from -- you guessed it -- China, potentially giving a boost the Dragon's ailing export sector.

The other reason for the swap seems more strategic, especially in conjunction with other currency trades that China has very quietly signed with Malaysia, Hong Kong, South Korea, Belarus, and Indonesia over the past three months. As the Financial Times puts it: 

Economists...see Beijing's currency swap deals as pieces in a jigsaw designed to promote wider international use of the renminbi, starting with making it more acceptable for trade and aiming at establishing it as a reserve currency in Asia, something that would also enhance China's political clout."

To this Tom Pellman, writing in his brilliant blog Double Handshake: China and Latin America (which I highly recommend! Tom has some great insights into the growing Sino-Latin American relationship) adds:

Argentina’s central bank president, Martin Redrado, was quick to point out that the deal is a contingency plan; the country doesn’t need it at the moment. And, another asterisk behind the deal:

“The fact that China represents such a small share of Argentina’s total trade (less than 12 percent) suggests limited impact on FX, but is an important political gimmick at this time (convertibility will remain an issue),” RBS wrote in a research note issued on Tuesday.

Gimmick or no, Zhou proved that even in an international setting like the IDB summit, China will look for ways to extend its reach (and currency priorities).

I couldn't have said it better myself. 

One China, indeed

It really is amazing, isn't it: you step away for a few days and the world seemingly shifts beneath you. Having returned from what was a beautiful wedding in Nashville, I sat down this morning for my daily perusal of the news to discover that the Chinese are running a cyber spying ring (this is admittedly not at all surprising); Jeffrey Herbst and Greg Mills are arguing that the DRC does not exist; having refused the entry of the Dalai Lama, South Africa is now awarding Fidel Castro the country's highest honor; El Salvador is switching its diplomatic ties from Taiwan to China; the United States is becoming the new China; and, as if such news wasn't sufficiently overwhelming, it would appear that things are looking up in Zimbabwe. My goodness!

There's a unifying theme underlying at least two of these stories, which is worth teasing out in greater detail. With China now prominent on the global stage, attention tends to focus primarily on its economic and military activities (a very Western paradigm through which to examine international relations), often failing to account for the continued centrality of the "One China" policy in Beijing's dealings with the world. The recent happenings in El Salvador and South Africa are cases in point. Writing on South Africa's decision, the CS Monitor's Scott Baldauf notes:

A nation that freed itself from an apartheid government, South Africa would seem to have much in common with leading liberation figures like the Dalai Lama, who speaks for about 5.4 million Tibetans, who live under Chinese rule.

But as a nation that depends heavily on Chinese markets for buying its rich natural resources, South Africa has given the appearance of having chosen commerce over principle. It's a decision that could cost South Africa its moral voice on the global stage.

Todd Moss, quoting Nelson Mandela's grandson, organizer of the peace conference which was to host the Dalai Lama, observes:

This rejection by the government, to not issue a visa, is really tainting our efforts at democracy. It’s a sad day for South Africa. It’s a sad day for Africa…Where are we heading in the future?

Straight into the open arms of the Chinese, I would argue. Indeed, they must be quite pleased with themselves in Beijing, what with a growing number of countries wrapped around their finger - in Africa and beyond. While many countries are quick to pledge their allegiance to the Chinese for purely economic purposes, in some cases the reasoning is rooted in greater historical motivations, as appears to be the case in El Salvador:

The FMLN has never forgotten that ARENA founder Roberto D'Aubuisson, who organized and led the death squads which tortured and killed thousands of civilians and who directly ordered the assassination of Archbishop of San Salvador Monsignor Oscar Romero on March 24, 1980 that sparked the civil war, was trained in "police techniques" in Taiwan.

Moreover, unlike Nicaragua, Guatemala or Paraguay, Taiwan has been unable to develop solid political dialogue with the FMLN even under DPP President Chen Shui-bian.

Dual recognition appears to be out of the question for El Salvador, handing another diplomatic win (of sorts) to the Chinese. Indeed, it's important to recall that for the leaders in Beijing, national unity is of utmost importance, second only to economic growth. And for developing countries struggling to sustain their growth rates in the face of an ongoing economic crisis, acknowledging Chinese national integrity is a small price to pay for the goods handed in return. While scholars and policymakers alike sometimes tend to bypass the centrality of the "One China" principle, it remains a central tenet of Chinese foreign policy, not to be overlooked. 

As for South Africa awarding Castro the Order of Companions of O.R. Tambo in Gold award... your guess is as good as mine.

How China sees the world: A lesson from The Economist

The most recent cover of The Economist has caught the attention of cartographers (self-proclaimed and otherwise) and Chinese scholars (ditto) alike. Falling more squarely into the former category (though without the self-proclaimed epithet), the folks over at Strange Maps offer an interesting analysis of the depiction: 

In the ocean immediately beyond the city are a few islands of particular interest to China:

• Japan: the old rival, whose rapid modernisation preceded China’s, but now eclipsed and reduced to a few harmless islands.
• Taiwan: similarly superseded by China’s massive economic progress, but still relevant as the rival claimant to be China’s ‘legitimate’ government. Even more repulsive to mainland China is a competing strand of current Taiwanese politics, striving for ‘independence’ and thus eschewing the ‘One China’ policy still officially espoused by both the communist mainland and nationalist Taiwan.
• Hong Kong: the former British crown colony that was handed back to China in 1997 and which has been allowed a degree of autonomy unthinkable elsewhere in China (e.g. Tibet) under an agreement often referred to as ‘One Country, Two Systems’, whereby Hong Kong was allowed to retain its capitalist system and its civil liberties, including inchoate democratic institutions.
• Spratly Islands: a sprawling archipelago of over 600 islets, atols and reefs in the South China Sea, between Vietnam and the Philippines, with barely 5 square kilometers of dry land between them. Because of their strategic location, the Spratlys, or parts of them, are claimed and partly occupied by China, Taiwan, Vietnam, the Philippines and Malaysia - and as such are a flashpoint waiting to happen.

Across a narrow representation of the Pacific Ocean lies the continent apparently most on China’s mind - America. And especially, apart from a tiny slice labelled Canada and a small appendage being dug up for minerals called South America, the United States. The US is a crumbling empire, with the Statue of Liberty clutching a begging bowl and holding up a sign saying: Please give generously. Next to some shacks is a sign saying Foreclosure Sale (a reference to the house repossessions that are symptomatic of the credit crunch which triggered the present economic recession). Wall Street is a fault almost splitting the US in two.

Europe is much smaller and more irrelevant than America, in the ocean beyond it. All that distinguishes it are Prada and Hermes, two brands of luxury fashion accessories, and presumably very popular with the wealthy Chinese elite - suggesting that Europe is only interesting to China as a glorified shopping mall. 

Next to Europe is Africa, equally distant from China, but at least decked out with some of the implements of industry, referring to the large investments China is making in Africa, benefiting the poorest continent with new infrastructure and providing China with access to much-needed raw materials for its burgeoning industry.

Visibly missing from the "map" are the Middle East (with especial attention paid to Iran) and a demarcation of Russia, both of which are vital Chinese allies. The Economist especially should be aware that much of China's world view is informed by its need for natural resources, predominant among them oil, for which both the M.E. and Russia are essential. Alas, I'm willing to forgive this wonderful publication for such a glaring oversight (this time). 

With somewhat of a different conundrum, however, is Will Lewis of Experience Not Logic - a brilliant China law blog - who asks whether the Economist cover might possibly infringe on copyright law. He draws on the important copyright dispute in Steinberg v. Columbia and offers up a most interesting discussion. If you look closely, the cover even alludes to this very case: the sign above the Imperial Palace reads: "With apologies to Steinberg and the New Yorker." Who would have thought that one can learn so much without even opening The Economist?! Sheer brilliance, I say. 

Confessions of a (Chinese) shopaholic

I didn't see the film, nor have I ever read the book, but am quite certain that the title (at the very least) nevertheless does well to encompass China's latest buying spree: 

Squeezed between falling profits and the credit crunch, a growing number of troubled corporations and countries are turning to cash-rich China for a bailout. And with foreign assets cheaper than they have been for years, Beijing is going on an international spending spree.

It appears that while the Chinese economy has also been hit by the crisis, the Chinese banks have not been so badly damaged, and policy banks seem ready to lend. And lend they are. 

Last week, the Chinese government signed a landmark $10bn agreement with Brazil that will ensure long-term supplies of oil to China while delivering much-needed financial assistance to help Brazil develop oil and gas reserves recently discovered in coastal waters. Also last week, China signed off  on $25bn in loans for Russia in return for oil supplies from newly discovered fields in Siberia for the next twenty years. Venezuela will likewise supply Beijing with up to 1 million barrels per day by 2015 in return for $6bn from China to top up an existing development fund. Indeed, not only is China taking full advantage of the economic downturn, but it is quickly assuming the role of Global Lender Extraordinaire.

I must say, however, China's " loans-for-oil" policy reminds me in part of the now infamous Oil for Food Programme. While I trust that Chinese loan money is being employed for its intended purposes, I would be shocked - shocked! - if at least a small portion of it wasn't unlawfully being diverted to help prop up recipient regimes. And when the recipient regimes are states like Russia and Venezuela, it would be a miracle indeed if  that weren't the case.

Latin America looks East

It would appear that Africa is not the only continent "looking East" these days: Latin America likewise appears to be following suit.

Indeed, while the United States is preoccupied with other parts of the world (Latin America is currently not a major priority for the Obama administration), China is paying increasing attention to its international alliances, particularly in Africa and across Latin America. For starters, Chinese President Hu Jintao is embarking on his whistle-stop tour of Africa tomorrow, where he is expected to stress Sino-African energy relations and shore up African good sentiment. Just yesterday, Chinese Vice President Xi Jinping, who is likely to succeed Hu Jintao early next decade, left on a tour that will take him to Mexico, Jamaica, Columbia, Venezuela, and Brazil -- all nations eager to strengthen their ties with China. Annnd, elsewhere in the region, Vice Premier Hui Liangyu is paying official visits to Argentina, Ecuador, Barbados and the Bahamas from February 7-19. Whew. It's exhausting just writing about it.  

No biggie, you say? Well recall that: 

President Hu visited Latin America in November, stopping in to Cuba and Peru. And while Hu was rubbing elbows with most of the major Latin presidents at the APEC summit in Lima, China’s highest ranking military officer was elsewhere in South America on tour.

That officer, Xu Caihou, is vice chairman of the Central Military Commission, which controls the People’s Liberation Army. Only President Hu outranks Xu in the military hierarchy. On his trip in November, Xu toured military installations in Venezuela, Chile and Brazil and promised increased exchanges between the two regions.

Trade between Latin America and China has also grown 13-fold since 1995, from $8.4 billion to $100 billion in 2007. China is now the region's second biggest trade partner behind the United States, and is an official member of the Inter-American Development Bank, which has huge (huge!) implications for regional trade. Trade between China and Africa likewise reached an all-time high in 2008, effectively solidifying China's predominance in the continent. And let's not forget Beijing's ties with Russia and, of course, Iran.

So the world is indeed shrinking, and what was once America's playground is now China's playground, too.